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Two potentially big developments in Gaming Supply

AGGRESSIVE PRICING BY IGT 

Late yesterday, we began hearing from a few of our slot manager contacts that 2 weeks ago, IGT began offering price discounts to all of its customers.  The discounts apply only to for sale games and do not extend to IGT’s participation products.  So far WMS & BYI are not matching, but they are calling their customers and scrambling for a response.  We believe that IGT’s aggression could pressure an already flat industry pricing environment.  

It is our understanding that the discounts extend to the end of September – the end of IGT’s fiscal year.  There is some speculation in the slot community that IGT is just trying to boost its ship share and produce another big quarter with the Ader Group proxy fight under way but that wouldn’t completely explain the longer discount duration.  We believe that the main goal of this program is to try and spur a replacement cycle on their video poker platform and S2000 (mechanical spinning reels) by offering very aggressive pricing, especially to bulk purchasers.  IGT dominates both the reel-spinning and video poker categories so that could mitigate the reaction from competitors.  The discounts in the most competitive segment – video (not poker) – were much less aggressive.

This is a bold move on IGT’s part and somewhat risky if the other players match IGT’s aggression.  However, replacement demand, while improving, is still at depressed levels and could use a spark, especially in reel-spinning and video poker, where IGT was most aggressive with the discounts. 

Here are some of the details from their program:

  • For ~10 machines:$500 off; >11-25 machines: $1,000 off, >26-50 machines: $1,750 off
  • Additional discount if you take delivery by June 28th
  • Very aggressive pricing on the S-AVP (mechanical reel) meant as a replacement to S2000
  • Very aggressive pricing on video poker (G20 & bar top version) 
  • Universal Slant with MLD has a hefty discount or a lower discount with a heavy trade-in credit

 

OREGON RFP

Switching gears, our research has turned up a potentially large opportunity for the gaming suppliers.  Apparently, the Oregon Lottery is considering submitting an RFP to refresh its all the units in its 20,000 VLT market.  This would be a series of very big orders that would meaningfully impact earnings of IGT, BYI, and WMS.